"A single-price monopolist will always charge a price that is on the elastic range of its demand." Explain why the previous statement is correct or incorrect
What will be an ideal response?
The statement is correct. Only when the demand is elastic is marginal revenue positive. (When demand is unit elastic, marginal revenue is zero and when demand is inelastic marginal revenue is negative.) Because marginal cost is always positive, a single-price monopolist will always produce in the elastic range of its demand because it produces where marginal cost equals marginal revenue. Hence the price that the monopolist sets will always be on the elastic range of its demand.
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An emissions tax equal to the marginal social cost of pollution at ___________ induces those believed to be polluting to internalize the externality and leads to the socially optimal quantity of pollution.
a. the socially optimal quantity of pollution b. the market-determined level of pollution c. the market-determined level of production d. zero pollution
Suppose you volunteer to help clean up your neighborhood, and the only payment you receive is the sense of goodwill that develops with your neighbors. Your efforts cause the GDP of the economy to
A. Fall by the opportunity cost of the time you spend doing volunteer work. B. Rise by the opportunity cost of the time spent by all of the people in the neighborhood on the volunteer project. C. Rise by the value of increased cleanliness of the neighborhood. D. Remain unchanged.
Sales and excise taxes tend to be ___________ because low income people tend to spend a _________ fraction of their income than high income people.
A. progressive; larger B. regressive; larger C. progressive; smaller D. regressive; smaller